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Thursday, 14 February 2013

Despite
the rosy scenario provided by the President’s State of the Union (SOTU) Speech
on February 12, a far more realistic presentation was made on February 13 by Douglas
W. Elmendorf, the Director of the Congressional Budget Office. The CBO is
apolitical and non-partisan, relying solely on the cold hard facts about the
economy that are gleaned from the data it gathers and its role of advising
Congress.

The CBO
are the government’s bean-counters and, not surprisingly, the mainstream media
paid Elmendoft little attention, thus rendering Americans subject to the
bloviations of the President and members of Congress who, as we know, have not
received a budget from the White House in three years, despite the
Constitutional obligation to provide one.

The
government has been running on “continuing resolutions” and political battles
have focused on raising the “debt ceiling”, the ability to borrow more and more
to cover its spending addiction. It is government on a credit card and as the
global economy slows, so does ours.

Elmendorf addressed the House
Committee on the Budget because all bills affecting spending must constitutionally be initiated in
the House. The bills to reform entitlement programs and the tax dode, and
address the national debt that the House has sent the Senate have died
there.

“Economic growth will remain slow
this year,” said Elmendorf, but “after this year, economic growth will speed
up.” But not by much. The unemployment rate will remain “above 7½ percent
through next year “and, if that happens, 2014 will be “the sixth consecutive
year with unemployment exceeding 7½ of the labor force—the longest such period
in the past 70 years.”

While
deficits (the difference between the revenue the government takes in and the
spending it authorizes) will shrink to $845 billion, “its smallest size since
2008”, the CBO anticipates that they will rise in the coming decade due to
“pressures of an aging population, rising health care costs, the expansion of
federal subsidies for health insurance, and growing interest payments on federal
debt.”

“As a
result, federal debt held by the public is projected to remain historically high
relative to the size of the economy for the next decade…such a large debt would
increase the risk of a fiscal crisis, during which investors would lose so much
confidence in the government’s ability to manage its budget that the government
would be unable to borrow at affordable rates.”

Need it
be said that President Obama has tripled the nation’s debt in his first
term in office? Or that the nation's credit rating was reduced?

The
reality facing the economy is slow growth, barely 1.4 percent this year. “That
pace is much slower than the average growth rate of potential GDP since 1950.”

The
President’s proposed “investments” (spending!) on absurd “renewable energy”,
wind and solar, are a very bad idea, along with the nearly 30 other proposed
“investments” and projections of the costs of Obamacare, a massive government
program, are characteristically unrealistic, disconnected from reality. His
claims about growth in the energy sector did not include the fact that it has
occurred mainly on privately owned land, while continuing to deter is expansion
domestically and offshore.

The
SOTU was yet another opportunity since 2008 to repeat that “nothing I’m
proposing tonight should increase our deficit by a single dime.” I am still
waiting for the mainstream media to challenge him on this, but unfortunately
everyone will have to wait four years more before we don’t have to listen to it
again.

The
House Committee on the Budget has been provided with the facts, even if the
public remains only vaguely aware of them. What the public will encounter is a
growing population of older Americans that will be a drag on the economy through
no fault of their own. Social Security and Medicare/Medicaid represent,
automatically, forty percent of all government expenditures. An entire
generation of younger Americans, often saddled with college debt, will encounter
problems finding employment commensurate with their education and skills.

The
other reality is a Congress dithering over new efforts at gun control and the
usual plethora of new spending bills that are oblivious to a growing national
debt that currently exceeds $16 trillion. The debt ceiling will be raised
because there is no alternative. Sequestration cuts—the result of a 2011
bipartisan failure to address spending—will represent a minimum impact on
domestic spending and a dangerous impact on defense if they kick
in.

The
President’s ideological devotion to the notion that government can “fix” every
problem and create job growth is a Marxist fantasy that will affect everyone’s
life in the decade ahead. The sum total of the CBO projections is that socialism
does not work and capitalism, when it is allowed to function,
does.